I /St^ fytmll %mtv& TH E GIFT Do not deface books by n .fjvjD^u;.i«svNN. V.WJ^^ .LtS'^.Z.lZ. l3/mj.u.. ^LEMENTAfll SCHOOL TEACHERS' DEFERRED ^ANNUITY FUND. ^ First Septennial Actuarial Eeport on the Assets and Liabilities of the Elementary School Teachers' Deferred Annuity Fund. Treasury Ch»mbers, WALTER RUXCIMAN 29 January 1908. WAJ^iJiK KUrnCiMAJM. (^Presented pursuant to Act 61 Sf 63 Vict. c. 57, s. 3 (6).) Ordered, by The House of Commons, to be Printed, 29 January 1908. LONDON: PRINTED FOR HIS MAJESTY'S STATIONERY OFFICE, BY EYBE AND SPOTTISWOODE, PEINTBES TO THE KING'S MOST EXCELLENT MAJESTY. And to be purotased, either directly or through any Bookseller, from WYMAN AND SONS, Ltd., Fetter Lane, E.G., and 32, Abingdon Street, Westminster, S.W. ; or OLIVER AND BOYD, Tweeddalb Court, Edinburgh ; or E. PONSONBY, 116, Grafton Street, Ddbltn-.^ 11. aiBB & B?QX1IW00D^, LTD, fSm HiSOTQ SraBBE,S.€ < Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924032187472 ELEMENTARY SCHOOL TEACHERS DEFERRED ANNUITY FUND. ELEMENTARY SCHOOL TEACHERS' DEFERRED ANNUITY FUND. TO THE LORDS COMMISSIONERS OF HIS MAJESTY'S TREASURY, TO THE BOARD OF EDUCATION, AND TO THE SCOTCH EDUCATION DEPARTMENT. 15, Walbrook, London, E.G. May it please Your Lordships : 16t]i August 1907. 1. Under the Elementary School Teachers' Superannuation Act, 1898, it was remitted to me by your Lordships to make the first septennial actuarial enquiry into the assets and liabilities of the Elementary School Teachers' Deferred Annuity Fimds, and I have now the honour to present my report. 2. The subject divides itself naturally into two branches, namely, the Mortality Experience, and the Valuation itself ; but, before taking up these in their order, a few preliminary explanations as to the constitution of the Fund will be useful. Preliminary Explanations. 3. Under subsection 4 of clause 3 of the Act of 1898, separate sub- sidiary funds are kept in respect of the contributions and annuities of men arid women teachers respectively ; and it has been the practice to extend this subdivision, and to keep separate accounts for England and Scotland in respect of both males and females. . Therefore, while for Mortality Experience purposes the English and Scottish teachers have not been distinguished, yet, in the Valuation, each country has been dealt with independently. 4. In Tables I. to IV. of the Appendix are given, for England and for Scotland, the total number of male teachers and the total number of female teachers included in the Valuation, with the annual amount of prospective annuities to their credit. Among the riiales 203 teachers put in recorded service in both countries, and among the females 648 did so ; and these teachers have been included in the statements for both England and Scotland, and, therefore, appear twice over ; but the ajnount of annuity to their credit secured by contributions made in respect of recorded service in England is entered in the English statement only, while the amount of annuity to their credit secured by contributions made in respect of recorded service in Scotland is entered only in the Scottish statement, so that each section of the Fund is made liable only for the annuities secured by contributions paid into that section. It is therefore assumed that, when the annuities emerge, that portion of them arising from recorded service in England wiU be paid out of the English Ftmds, and similarly for the Scottish Funds. 5. In dealing with the Mortality Experience, and with the Valuation, every age was treated separately, but in Tables I. to IV. the teachers have been grouped into certain age periods for conciseness, the age period being given in the column on the left-hand side of the tables. The ages tabulated are those nearest birthday on the Valuation date, namely, 31st March 1906. Then, in the succeeding eight double columns, there are given the number of teachers in that age group,, and the corresponding annuities which have to be valued. Under heading " " are the teachers whose last recorded service was not more than six months previous to the date of Valuation. Under heading " 1 " are those whose last recorded service was from six to eighteen months from that date, and so on for the other columns ; and in the final double column are the total number of teachers, and the total annuities to credit, in the given age group. 11. A 2 4 ELEMENTARY SCHOOL TEACHEES' DEFERRED ANNUITY FUND. 6. The form of these tables is due to the necessities of the Valuation. By the constitution of the Fund, the contributions of the teachers are treated as single payments for the purchase of deferred annuities ; and, on the contri- bution being made, the annuity becomes at once a vested benefit, which cannot under any circumstances be forfeited, except by death. As long as a teacher is putting in recorded service contribution to the Firnd is compulsory, and each contribution as it is received is applied to purchase a paid-up deferred annuity ; so that the amount of the deferred annuity is continually increasing, and the final annuity, which will be entered upon at age 65, is built up by a large number of small individual accretions. When, however, a teacher ceases to put in recorded service contribution to the Fund also ceases, but the annuity already to the credit of the teacher remains ; and, should he survive to age 65, and claim his annuity, that annuity will become payable, no matter what occupation the teacher may have followed in the interval. Or, after a period during which recorded service has not been put in, the teacher may return to the profession and again put in recorded service, and the annuity will then begin again to increase, the annuity previously to his credit still remaining. Thus, the Fund is under a liability for deferred annuities in respect of many teachers who have presumably left the service entirely, and who have been in the majority of cases lost sight of. They may be alive, or they may have died, and we have no means of ascertaining their present condition. Those in the column headed " " are probably almost aU. alive and in active service, as also the great majority of those in the column headed " 1." But it is quite likely that many of those in the colmnn headed " 2," and most of those in the other columns, have retired from the teaching profession, although some of them may return ; also, in the course of nature, some of them must certainly have died. 7. After a teacher has put in ten years of recorded service, he may, subject to certain limitations, claim disableinent allowance in the event of his falling into bad health; and in such cases it is possible to trace the teacher after recorded service has ceased. There are a considerable number of teachers in this category, and, through the courtesy of the Education Departments, they were almost without exception traced up to the Valuation date. In the Mortality Experience investigation, therefore, observations were closed on the day of last recorded service in each case where there was no disablement allowance, or on the Valuation date where there was disablement allowance. This means that, from the points of time named, both the years of life and the deaths ceased to be taken into account ; and the investigation relates to the period of active service where there was no disablement allowance, with a prolongation of that period to the Valuation date in the other eases. 8. The last preceding paragraph relates to teachers below age 65. On attainment of the age of 65, contributions to the Superannuation Fund cease even although the teacher may receive an extension of his certificate. It has,' however, been possible to trace up to the Valuation date every teacher who attained the age of 65, so that in all such cases we have the complete experience. The MoHality Experience. 9. In Table V. for male teachers, and Table VI. for female teachers, is ^ven, in decennial age groups, a summary of the years of life, headed " Ntimber p,t Risk," and the corresponding deaths that occurred, during the seven years from 1st April 1899 to 31st March 1906. There are no lives tabulated aged more than 70, because no teacher aged more than 65 at the lime of the passing of the Act could join the Fund ; and although there were one or two cases of teachers who passed the age of 70 during the seven years under review, they were so very few in number that they have been excluded from the observations. 10. It will be noticed that for male teachers there were 181,137 years of life and 1,071 recorded deaths ; while for female teachers there were 258,169 years of life, and 872 recorded deaths. It will also be noticed that, on the average, the female teachers were younger than the males, and this partly ELEMENTARY SCHOOL TEACHERS DEFERRED ANNUITY FUND, D accoiints for the smaller proportion of deaths among them, but not entirely, because the rate of mortality amongst the females was, age by age, lower than among the males. 11. In Tables V. and VI. further columns are given in order that a comparison may be instituted between the mortality actually recorded and that which would have taken place had the rates of mortality exhibited by certain other standard tables prevailed. Looking at Table V. for males, it will be seen that, while the actual deaths recorded among the teachers were 1,071, those that would have occurred had the mortality of Government annuitants prevailed would have been 2,963 ; and there would have been 2,025 deaths had the mortality followed the table recently prepared by the British assurance companies. Similarly, in Table VI., in the case of female teachers, the actual deaths recorded were 872 in niunber, while those expected by the Government table were 2,630, and by the British Offices table 2,397. 12. It should here be mentioned that the Government table referred to is that which was prepared by the late Mr. A. J. Finlaison, and is contained in his report, which was ordered by the House of Commons to be printed on 7th February 1884. It is the table which excludes from observation the first 4^ years from the date of purchase of the annuity, and it represents what may be called the normal mortality among Government annuitants, after the main effects of the selection which takes place on the purchase of an annuity have worn off. Similarly, the British Offices table is that published by the Institute of Actuaries and the Faculty of Actuaries in 1903, and which excludes the first five years following the purchase of the annuity. 13. A clearer light will be thrown on the situation if the numbers given in Tables V. and VI. be expressed in percentages, and that is done in the following short table. It shows the percentages which the recorded deaths bear to the deaths expected by the Government tables and the British Offices tables respectively. Age Period. Percentage of Recorded to Expected Deaths. Males. Government Table. 20 to 29 - 30 „ 39 40 „ 49 - 50 „ 59 60 „ 69 - All ages 21-45 18-49 35-08 57 'IS 87-74 36-15 British Offices Table. Females. Government Table. British Offices Table. Age Period. 35-89 30-74 54-90 69-97 85-45 52-89 18-28 25-44 36-52 64-70 81-19 33 16 23-23 28-59 35-05 61-83 85-71 36-37 20 to 29. 30 40 50 60 39. 49. 59. 69. All ages. 14. From the above tabular statement it appears that the total recorded deaths that occurred among the males were barely more than one-third of those to be expected by the Government table, and barely more than one-haM of those expected by the British Offices table ; while, among female teachers, the actual recorded deaths were less than one-third of those expected by the Government table, and not much more than one-third of those expected by the British Offices table. It will also be noticed that at the youngest ages the percentage pf recorded to expected deaths is very small indeed, and that it has a tendency to increase as age advances, and above age 60 it amounts to between 80 per cent, and 90 per cent, in each case. 15. These results being startling, it is important to ascertain the cause. Now in the first place, from the nature of the case, neither the Government tables nor the British Offices tables are worthy of much confidence at the younger ages. Annuities are not purchased as a rule until comparatively late in life, and, ' therefore, statistics of annuitants are very meagre before A 3 6 ELEMENTARY SCHOOL TEACHERS' DEFERRED ANNUITY FOND. about age 50. Thus, in tlie Grovernment table for male lives, between ages 20 and 40 there were recorded only 1,480 years of life and 28 deaths ; and for female lives there were recorded only 3,806 years of life and 40 deaths ; while, in the case of the British Offices tables at the same ages there were only 378 years of male life and 5 deaths, and 1,115 years of female life and 12 deaths. Manifestly these statistics are entirely inadequate to be a trust- worthy basis for mortality tables, and at these younger ages both sets of annuity tables may be treated as purely hypothetical. Above age 50 the case is different, but there the recorded deaths among the teachers commence to approximate in. number to the expected deaths by the annuity tables. 16. The actuary of the Provident Fund of the teachers was good enough to show me the results of an investigation which he had made into the mortality experience of that Fund. That experience was of very limited extent, and entirely insufficient in itself to form a basis of calculation ; but a comparison with the results brought out in the present investigation, which embraces the very large body of facts now submitted, throws some light upon the question. Among the males in the Provident Society there were 15,139 years of life and 55 deaths, and among the females 5,409 years of life and 10 deaths. Now, if in the Provident Fund the mortality had been at the rate experienced in the Deferred Annuity Fund, there would have been 72 deaths among the males and 21 among the females. It thus appears that the mortaHty in the Provident Fund was stiU lighter than that in the Deferred Annuity Fund, and to this extent the Provident Fund accentuates the present figures-. 17. Again, in connection with an enquiry instituted by the Liverpool Education Department, the mortality experience of the Liverpool teachers was taken out, and the actuary has kindly shown me an abstract of his statistics. Among the Liverpool male teachers there were 3,707 years of life and 17 deaths, while, had the mortality followed that of the Deferred Annuity Fund now under investigation, there would have been 12 deaths. Among the Liverpool female teachers there were 10,167 years of life and 15 deaths, while the experience of the Deferred Annuity Fund would have given 22 deaths. Here, the mortality among the males seems to have been higher than in the Deferred Annuity Fund, and among the females considerably lower ; but the data are of such limited extent that much value cannot be placed on the comparison. Nevertheless, on the whole, this again confirms the experience of the Deferred Annuity Fund. 18. It is probable, however, that, at the younger ages, the real mortality among the teachers is not so light as that thus brought out. Under the regulations, teachers do not get any disablement allowance imtil they have put in ten years of recorded service. Therefore, some of those teachers with less than ten years of recorded service who have dropped out from the active list, and who from that point of time have not been included in the obser? vations, may have done so on account of ill-health, and may have subsequently died, and their deaths may not have been reported to the Department. This would affect the observed mortality. Also, a few teachers may have died by accident, or of an acute disease, during active service ; and they may have been dropped out of the salary lists without their deaths having been reported to the Department. In this way again there may have been caused an under- estimate of the mortality. It does not, however, affect the question that the teacher should have died subsequent to retirement from active service provided always that he was in average health at the time of retirement, so that his retirement was not due to the same cause that produced his death.' 19. Probably for these reasons some deaths that actually occurred may not have been included in the observations, and, therefore, at the younger ages the mortality may thus have been understated. At the older ages, however, that can scarcely be so, at least not to any appreciable extent, and from age 40 onwards the statistics here submitted no doubt show the real mortality that prevails among the teachers. The teachers, therefore, appear to be a very select class, and it becomes interesting to inquire to what extent their mortality is comparable to that of the mortality am.ong other select ELEMENTARY , SCHOOL teachers' DEFERRED ANNUITY FUND. 7 classes of the couunttnity. Tliat can be done for the male teachers, because Mortality Experience investigations have, been made for total abstainers from alcoholic beverages, and also for the clergy of the Church of England. To Table V., therefore, columns have been added, showing the number of deaths that would have occurred among male teachers had the mortality among total abstainers prevailed, and similarly had the mortality among the English clergy prevailed. It will be seen that, while there were 1,071 deaths recorded among the teachers, there might have been expected 1,230 deaths under the abstainers' mortality, and 1,181 under the clergy mortality. Also, it wiU be noticed that it is entirely at the younger ages that the lightness of the mortality among the teachers prevails. Above age 40 the mortality of the teachers is higher than that of the abstainers and than that of the clergy. This, therefore, confirms the opinion expressed above, that, after age 40, the true mortality of the teachers is displayed, while below age 40 some deaths have been omitted from the observations. 20. Therefore, guided by the Mortality Experience investigation now being reported upon, and by the tables for the abstainers and for the clergy, and, at ages over 70, by the annuity tables of the British Offices, special tables have been constructed, which are suitable for use in the Valuation. Up to age 40 the special table for males has been based upon the experience of the abstainers and of the clergy, while for ages 40 to 70 the actual experience of the Deferred Annuity Fund hag been taken. For the purposes of the Valua- tion it is necessary to carry the table on to the end of life, and, therefore, from age 70 onwards the British Offices table was adopted, except that for ages 70 to 75 the rate of mortality of the British Offices has been reduced 10 per cent. This is in accordance with the indications given in the Mortahty Experience investigation, which shows that while, as far as the observations extend, the rate of mortality is below that of British Offices, yet as age advances, it tends to approximate to that average rate. 21. As regards the females, there are no other published observations available to which recourse can be had for guidance ; but the present investi- gation shows that the same causes which have been operating among the males have also been operating among the females, and to a similar extent. Therefore, in preparing the special table for the female teachers, for ages below age 40, the recorded female rate of mortality was increased in about the same proportion as in the case of the males. For ages 40 to 70 the experience of the Fund itself was taken, and for ages above 70 the curve was joined on to that of the British Offices as above explained. 22. In Tables V. and VI., the last column gives the number of deaths that would have occurred had the mortality followed these new tables foi male and female teachers respectively. Among the males there are 1,267 expected deaths against 1,071 recorded deaths, and among the females there are 1,123 expected deaths against the 872 recorded deaths. These figures seem to me to be reasonable in themselves, and to be justified at aU points by the investigations that have been made. If they err at all, they probably rather exaggerate the mortality prevailing among the teachers, and will, therefore, tend to lower the estimate of the hability of the Fund, but not to any great extent ; and, in my opinion, it is safe to adopt them, although I could not recommend that tables showing a higher rate of mortality should be employed. 23. In Table VII. are given the graduated rates of mortality per cent, according to the new tables for male and female teachers respectively. The rates resulting directly from the calculations were irregular, without definite sequence from age to age, and, for the purpose of practical calculation, had to be adjusted. This was done by a suitable formula of finite differences, of such a kind that the aggregate mortality in each 10 years of life was not altered, while the rates at individual ages were so adjusted to each other as to make them run smoothly throughout the whole table, and join on without a break at about age 75 to the rates shown by the British Offices Annuity Table. Moreover, the formula employed was such. that aU the special features in both the male and female mortality of teachers have been retained. A 4 8 ELEMENTARY SCHOOL TEACHERS' DEFERRED ANNUITY FUND, The Valuation. 24. All the accumulations of the Deferred Annuity Fund are invested in Consols, and the price at which Consols are to be taken on the Valuation date is of importance. 25. The following were the investments on 31st March 1906 : — Fund. Cash invested. Couaols purchased. Average Cost Price per Cent. England — Men England — Women - - - Scotland— Men Scotland — Women £ s. d. 498,838 5 11 500,278 8 6 80,628 18 5 75,509 9 £ s. d. £ s. d. 539,717 9 5 92 8 6 543,397 3 10 92 1 4 87,502 9 2 92 2 11 82,105 13 11 91 19 4 Total 1,155,254 13 7 1,252,722 16 4 92 4 5 26. For the purposes of a Valuation there are several ways of dealing with the securities according to circumstances. Sometimes they are taken at cost price, sometimes at the mean market price of the day, and sometimes an estimate is made as to the probable future course of prices. After com- municating with the Treasury on the point, it was decided to take the mean market price of the day, which was 90|- per cent., and the Consols have been valued accordingly. They, therefore, show a depreciation of 21,540i. 10s. 7d., as compared with the cost price, but they are taken at a much higher figure than that at present ruling in the market, which, at the moment of writing this report, is only about 81|- per cent. Therefore, in the Valuation, the securities have been taken at about 9 per cent, above their present market value ; and, were the present market value to be adopted, the result of the valuation would come out worse than as shown. On this question, however, it should be remembered that, with such a Fund as the Elementary School Teachers' Deferred Annuity Fund, there will be no need for many years to realise the investments. The funds in hand will continue for a long period to increase rapidly in amount, and investments made at the present low price of Consols will be profitable. 27. Three Valuations have been made ; and in the main Valuation, which is the one that, in my opinion, should be adopted, interest has been assumed at 2|- per cent. At their depreciated value Consols yield a decidedly better return, and the difference in the interest received and accumulated from year to year will steadily improve the position of the Fund and tend to make good the present deficiency. Moreover, the investments of the Fimd are at present being made at the current low quotations, and, should Consols appreciate in value, the Fund will gain thereby on the capital account. 28. As mentioned above, three Valuations have been made. In the first, the new teachers' table was employed, as giving the best indication available of the probable future mortality amongst the teachers. That mortality has in the past been very light, and there is every reason to anticipate that it will continue light m the future. By adopting a table with a low rate of mortality, the estimate of habihty is enhanced, because it is thereby assumed that a large proportion of the teachers will survive to age 65 to draw their annuities In view, therefore, of the light mortality which has prevailed, and that will no doubt prevail m future, it is not surprising that in each of the four Funds a considerable deficiency should be disclosed. 29. The second Valuation was made on the basis of the tables at present in use for computing the amount of deferred annuity which each payment by a teacher provides. In constructing these tables the Government Annuity Table of 1883 was employed, but it is not quite clear what rate of interest the actuaries assumed m their calculations. That, however, is not of consequence, because the tables have been taken exactly as they stand. ELEMENTAltY SCHOOL TEACHERS' DEFERRED ANNUITY FUND. 9 30. The third Valuation was made on the basis of the Government Annuity Tables of 1883, at 2| per cent, interest. These two supplementary Valuations by the Government tables have been made for the purpose of comparison, but it would not be sale to act upon them. 31. In Tables Nos. VIII., IX., and X. of the Appendix a summary of the three Valuations is given. 32. From Tables Nos. I., to IV. it will be seen that a large number of teachers have passed out of observation, so that it cannot be ascertained whether they are alive or dead. Nevertheless, the Fund is under liability for their annuities, because those of them who survive to age 65 will be entitled to draw whatever annuities are to their credit in respect of past payments. This pecuHarity of these Deferred Annuity Funds presents a difficulty in connection with the Valuation, and has had earnest consideration. It would overstate the estimate of liabiHty to assume that all these teachers are stiU. alive ; and, on the other hand, their annuities must be brought into account and valued, or otherwise the liability would be seriously under- estimated. 33. To meet the difficulty, it has been assumed in the Valuation that these teachers have been subject to the same rates of mortality as have prevailed among the teachers who have been traced and observed. The deferred annuities have been valued as if all the teachers were alive, and the liability so ascertained has been reduced to correspond with the proportionate number of teachers who would have survived from the date of their last recorded service to the Valuation date had the mortality among them followed the standard. Therefore, in the first Valuation, by the new teachers' tables, these tables have been used for the purpose of this correction ; and in the second and third Valuations, by the Government tables, it is the Government tables that have been employed for making the adjustment. Probably, therefore, in the Valuations by the Government tables the number of teachers assumed to have survived is too small, and the estimate of liabiHty is below what it should be, even. without reference to future mortality. 34. Dealing first with the main Valuation by the new table for teachers at 2|- per cent, interest, the following is the condition of the four I'unds : — England. — Men : — Assets : 539,717Z. 9s. 5d. Consols at 90| Cash balance - Total assets Estimated liability Deficiency ENGLAND.^Women : — Assets : 543,397L 3s. lOd. Consols at 90^- Cash balance - Total assets Estimated liability Deficiency Scotland. — Men : — Assets : 87,502Z. 9s. 2d. Consols at 90^- Cash balance - Total assets Estimated liability Deficiency 11. B ±, s. ot. 88,444 6 3 18 6 9 - 488,462 13 - 570,870 10 - 82,407 17 - 491,774 9 26 6 2 491,800 15 - 527,274 14 2 35,473 18 10 79,189 14 6 13 6 6 - 79,196 8 - 91,539 - 12,342 12 10 ELEMENTARY SCHOOL TEACHEES' DEFERRED ANNUITY FUND. Scotland. — Women: — £ s. d. Assets : 82,105L 13s. lid. Consols at 90^ 74,305 13 1 Cash, balance - - - 5 2 Total assets Estimated liability - Deficiency 35. Taking all the four Funds together, the following is, therefore, the position : — Men teachers : — Total assets Total estimated liability Total deficiency - Women teachers : — Total assets - - _ Total estimated liability Total deficiency Men and women teachers : — Total assets Total estimated liability - Total deficiency - 36. Valuation No. 2 by the tables at present in use and at the rate of interest involved in them, probably about 2 per cent. : — England. — Men : — £ s. d Assets - 488,402 13 Estimated Kability - 505,388 14 74,310 15 80,384 2 1 6,073 6 11 Rowing is, th £ s. 567,659 1 662,409 10 ere d. 94,750 9 566,111 10 607,658 16 3 41,547 5 9 1,133,770 11 1,270,068 6 3 136,297 14 9 Deficiency 16,926 1 England. — Women : — Assets - - 491,800 15 2 Estimated liability - _ 5()x 735 6 Q Deficiency - 9^934 jq 10 Scotland. — Men : — Assets _ _ - - - 79,196 8 Estimated liability - _ 81 414 "^ Deficiency - - . 2,217 14 Scotland. — Women : — Assets - _ - - 74,310 15 1 Estimated liability _ 75 801 10 Deficiency - . 1^499 14 n 19,143 15 566,111 10 577,536 16 3 11,425 5 9 1,133,770 11 1,164,339 12 3 30,569 9 ELEMENTARY SCHOOL TEAOHERS' DEFERRED ANNUITY FUND. 11 37. Taking all the four Funds together, the following is, therefore, the position :— Men teachers : — £ s. d. Total assets - - 567,659 1 Total estimated liability - - - 586,80S 16 Total deficiency - Women teachers : — Total assets Total estimated liability - Total deficiency - Men and women teachers : — Total assets Total estimated liabiKty - Total deficiency - 38. Valuation No. 3 by the Government tables of 1883 at 2^ per cent, interest : — England. — Men : — £ s. d. Assets - - 488,462 13 Estimated liability - - - 422,361 6 Surplus England. — Women : — Assets _ - - Estimated liability Surplus Scotland. — Men : — Assets - - Estimated liability Surplus Scotland. — Women : — Assets - - - Estimated liability Surplus 39. Taking all the four Funds together, the following is, therefore, the position : — Men teachers : — £ s. d. Total assets - - - 567,659 1 Total estimated liabiKty - - - 490,619 14 Total surplus - - 77,039 7 Women teachers : — Total assets- - - - 566,111 10 3 Total estimated liability - - - 473,853 2 Total surplus - - - 92,258 8 3 B 2 66,101 7 491,800 15 412,190 2 79,610 15 2 79,196 8 68,258 8 10,938 74,310 15 61,663 2 1 12,647 13 1 12 ELEMENTARY SCHOOL TEACHERS' DEFERRED ANNUITY FUND. Men and women teachers : — £ s. d. Total assets - - - - 1,133,770 11 3 Total estimated liability - - 964,472 16 Total surplus - - - 169,297 15 3 40. The Valuations Nos. 2 and 3 are given for the sake of comparison. No. 2 is instructive. Had the mortality experienced in the past been in accordance with the Government tables used in fixing the rates of contri- bution, this Valuation should have shown a small surplus, or at any rate the deficiency should have been very small. As above pointed out, there has been a depreciation of 21,540Z. 10s. Id. in the value of the investments, because the average purchase price of the Consols was 92Z. 4s. 5d. per cent., "and the price assumed in the Vakiation is 90^L per cent. ; but on the other hand there has been a decided gain in interest, because the Funds receive the fuU dividends at 2^- per cent, on the Consols, free of income tax, and this has yielded a profit from interest, because the Consols were purchased below par, and because the tables involve interest at only about 2 per cent. There- fore, that this Valuation should disclose a marked deficiency entirely confirms the result of the Mortality Experience investigation. It shows that a considerably larger number of teachers have survived than are provided for in the Government tables, and that when their annuities are brought into account the surplus that would otherwise have existed is turned into a deficit. This fact further confirms the view that it would not be safe to adhere to the present tables, and that if no change be made the existing deficiency will rapidly increase. 41. Valuation No. 3, based on the Government tables at 2^ per cent, interest, is only of academic value. It assumes a much higher rate of mortality than has prevailed in the past, and it assumes that that higher rate will continue in the future. Therefore the surplus shown by this Valuation has no real existence. 42. In view of the results of this enquiry, it will no doubt be thought necessary to take into consideration the condition of the Elementary School Teachers' Deferred Annuity Fund. The Valuation applies only to the annuities actually at the credit of the teachers on the Valuation date, and does not touch upon the question of the annuities that should hereafter be allotted in consideration of the future periodical payments of the teachers. The Elementary School Teachers' Superannuation Act, 1898, does not explicitly provide for a revision of annuities already allotted ; and yet, there being, on an accurate Valuation, a serious deficiency in each of the four Funds it would appear that such revision is necessary if the Funds are to be kept solvent. 43. The Act, however, lays down rules for changing the tables for annuities to be allotted in the future. By subsection 2 of clause 4 it is enacted that, if it appears from any actuarial report under the Act that the assets and liabiHties of either account {i.e., the account for men or the account for women) are such as to require a reduction, or to justify an increase, of the annuities, the Treasury may cause fresh tables to be constructed, 'in order that your Lordships may have information as to the results of this investigation as it affects annuities to be allotted in respect of future contributions, Table XL has been added in the Appendix. In it is given for men and women respectively, a comparison of the amounts of deferred annuities secured by a single payment, first, by the tables at present in use, and, secondly, by the new tables for teachers at 2^ per cent, interest on which the Valuation has been based. For the purpose of the Valuation' the rates were required for exact ages, and not for ages next birthday, and the tables at present in use have therefore been adjusted to make them corre- spond. The table gives, for men, the annuity secured by a single payment of 31 at the exact age given in the first column, and, for women, the corresponding annuity for a single payment of 21. The comparison shows that the present scale provides annuities at a rate considerably higher. ELEMENTARY SCHOOL TEACHEBS' DEFERRED ANNUITY FUND. 13 especially at the younger ages, than can be afforded when the rate of mortality actually prevailing amongst the teachers is taken into account, even although the rates by the new tables for teachers have been calculated at 2^ per cent, interest, and the rates by the tables actually in use at probably about 2 per cent, interest. 44. Columns have been added for the annuities at Post OflS.ce rates on the same conditions of exact ages ; and it will be seen that these are considerably higher than those granted to the teachers by the present tables, and very much higher than those which the new tables justify. This is due mainly to the fact that the teachers appear to be a very select class of lives ; but it is partly to be accounted for in another way. The Government tables were based upon the experience of Government annuitants for the 67 years from 1808 to 1875, and they represent the mortality which prevailed during the first three-quarters of the last centary. Within the past 30 or 40 years, however, there has been a marked improvement in human longevity — an improvement which is evidenced by various investigations made in recent years — and it is therefore more than probable that the Government tables of 1883 do not exhibit truly the rates of mortaHty now prevaihng amongst annuitants. I have, &c. GEORGE KING, Actuary. B 3 14 ELEMENTARY SCHOOL TEACHERS' DEFERRED ANNUITY FUND. APPENDIX TO THE TABLES ELEMENTARY SCHOOL TEACHERS' Numher of Mevibers included in the Valuation and the Annuities to their Recorded TABLE England. — Years elapsed since Age Group. 0. 1. 2. 3. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Cred.t. 21 to 24 25 „ 29 30 „ 34 35 „ 39 - 40 „ 44 - 45 „ 49 - 50 „ 54 - 55 „ 59 - 60 „ 64 - 65 and over 685 1,411 1,009 1,028 1,124 905 575 325 289 646 £ 1,224-877 7,666-071 7,849-537 7,174-473 6,695-872 4,488-179 2,499-636 1,012-185 650-037 829-782 1,098 3,867 2,739 2,782 3,088 2,607 1,757 884 696 55 £ 1,817-957 18,479-244 20,151-703 18,384-813 17,424-840 12,393-216 6,977-295 2,791-487 1,760-461 122-210 74 440 262 230 221 186 112 60 59 4 £ 81-262 1,635-681 1,759-771 1,368-791 1,148-029 823-460 413-741 167-713 134-639 8-374 3 142 75 69 44 34 26 12 15 2 £ 2-085 453-373 349-932 320-899 170-685 114-724 67-233 21-473 20-923 2-410 7,997 40,090-649 19,573 100,308-226 1,648 7,541-461 422 1,523-737 TABLE England. — ■ Age Group. Years elapsed since No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. 21 to 24 - 25 „ 29 30 „ 34 - 35 ., 39 - 40 „ 44 45 „ 49 - 50 „ 54 55 „ 59 60 „ 64 - 65 and OTer 2,254 4,036 1,649 1,217 1,233 1,139 710 477 349 467 13,531 £ 1,979-548 10.943-187 6,170-923 4,248-132 3.740-103 2,982-770 1,510-811 788-346 451-125 372-041 33,186-986 3,509 11,016 4,487 3,223 3,235 2,855 1.663 941 609 34 £ 2,864- 26,545- 15,658- 10,661 9,614 7,323 3,650 1,733 942 47 31,572 908 177 270 1,410 290 637 084 368 414 318 075 256 591 165 390 75 852 58 512 12 £ 111-183 3,021 -.524 1,988-999 1,091-748 ^-28-123 591-033 325-089 122-274 78-129 13-920 78,941-386 3,476 8,172-022 447 308 155 84 73 28 21 20 £ •630 853-825 748-763 340-796 154-086 116-510 40-153 22 114 18-923 1,138 2,295-800 ■ELEMENTARY SCHOOL TEAOIIERS' DEFERRED ANNUITY FUND. 15 REPORT OF THE ACTUARY. I. TO IV. DEFERRED ANNUITY FUNDS. Credit grouped according to Age and to the Time elapsed since last Service. I. Men. last Recorded Service. Total. i. 5. 6. 7, 8. No. ADnuity to Ciedit. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. &9 53 41 43 20 24 13 14 297 £ 254-977 177-155 142-482 121-407 46-697 52-639 21-471 15-935 36 52 40 33 15 15 13 13 £ 80-824 137-269 97-818 68-039 23-089 18-047 17-411 11-296 12 58 26 18 18 17 8 14 2 £ 12-511 82-490 33-343 17-001 11-363 12-824 5-250 6-198 -602 14 7 10 7 6 4 6 1 £ 6-049 3-712 3-477 3 008 1-793 -771 -864 -069 1,860 5,997 4,262 4,223 4,581 3,792 2,532 1,319 1,106 710 £ 3,126-181 28,582-681 30,513-906 27,526-331 25,649-350 17,908-736 10,043-208 4,037-761 2,600-353 963-447 832-763 217 453 - 793 173 181-582 55 19-743 30,382 150,951-954 IT. Women. last lleoorded Service. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. Total. No. Annuity to Credit. 235 262 164 98 55 36 33 14 358-632 487-822 275-720 143-366 66-224 37-312 30-390 9-748 104 •216 146 102 75 36 36 17 3 897 1,409-214 735 106 807 265-455 163-884 98-720 56-840 22-913 20-121 8-249 1-340 34 117 105 82 58 41 29 23 744-329 489 21-389 82-206 64-668 42-366 24-867 ■114 -268 -597 15- 7- 263-475 B 4 1 24 32 28 24 11 135 -121 6-938 8-238 6-364 4-519 1-358 -706 •688 28-932 5,942 17,283 7,700 5,410 5,180 4.535 2,690 1,620 1,097 516 51,973 £ 4,956-269 41,850-755 25,409-396 16,854-270 14,527-542 11,165-838 5,603-341 2,724-609 1,515-311 434-813 125,042-144 16 ELEMENTARY SCHOOL TEACHERS DEFERRED ANNUITY FUND. TABLE Scotland. — Years elapsed since Age Group. 0. 1. 2. 3. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. No. Annuity to Credit. 21 to 24 25 „ 29 - 30 „ 34 35 „ 39 40 „ 44 45 „ 49 50 „ 54 55 „ 59 - 60 „ 64 65 and over - 109 217 120 109 119 108 73 50 43 111 £ 153-076 1,191-084 977-103 832-865 769-339 586-170 309-672 169-009 107-980 153-298 259 589 412 405 463 453 312 172 127 15 £ 310-683 2,787-899 3,167-051 2,894-408 2,854-248 2,341-272 1,332-276 591-412 350-008 35-821 9 84 36 30 14 33 18 18 6 1 £ 11-671 327-998 218-639 194-779 77-659 164-992 73-689 54-848 15-705 2-318 1 43 29 14 9 2 3 3 £ 1136 114-476 142-293 56-913 30-553 7-509 8-021 7-789 1,059 5,249-596 3,207 16,665-078 249 1,142-298 104 368-690 TABLE Scotland. — Years elapsed since 1. 2. 3. Age Group. No. Annuity to "NTr. Annuity to No Annuity to No Annuity to Credit. Credit. Credit. Credit. £ f £ £ 21 to 24 589 267-208 1,061 464-098 28 14-764 1 -188 25 „ 29 755 1,710-645 2,504 5,031-941 312 585-094 93 152-883 30 „ 34 247 836-618 870 2,902-116 151 443-831 76 175-362 35 „ 39 166 553-647 584 1,848-930 72 208-958 42 91-762 40 „ 44 166 475-271 517 1,420-310 48 122-644 22 38-461 45 „ 49 113 265-169 375 894-193 35 74-135 8 10-928 50 „ 54 70 135-633 244 493-810 17 33-366 2 2-156 55 „ 59 42 65-981 76 128-128 9 14-160 — — 60 „ 64 20 23-631 49 69-178 7 9-583 1 -797 65 and over - 29 22 160 3 3-812 — — — — 2,197 4,355-963 6,283 13,256-516 679 1,506-535 245 472-537 Total Men - 9,056 45,340-245 22,780 116,973-304 1,897 8,683-759 526 1,892-427 Total Women 15,728 37,542-949 37,855 92,197-902 4,155 9,678-557 1,383 2,768-337 Grand Total 24,784 82,883-194 60,635 209,171-206 6,052 18,362-316 1,909 4,660-764 Elementary school teachees deferred annuity fund. 17 WL Men. last Recorded Service. . — 5. Annuity to Credit. No. 6. Annuity to Credit. 7. T otal 1 +. 8. 1 No, i Annuity to Credit. ■ 1 No. I No. Annuity to Credit. No. Annuity to Credit. 1 1 £ £ £ £ £ — — — — — — — — 378 476-566 16 35-680 17 30-686 6 5-360 1 -794 973 4,493-977 '.- 18 70-031 21 48-083 18 24-732 3 2 •363 657 4,650-295 7 24-402 5 10-430 4 4-067 2 •863 576 4,018-727 3 9-830 13 23-552 3 3-262 — — 624 3,768-443 3 7-500 3 3-557 2 2-262 1 •227 605 3,113-489 1 4 7-748 — 2 1-628 — — 412 1,733-034 — — 3 3-378 1 •677 I ■107 248 827-220 1 ■944 1 •205 3 •975 — — 181 475-817 52 — — — — — — — 127 191-437 156-135 63 119-891 39 42-963 8 4^354 4,781 23,749 ■ 005 IV. Women. last Recorded Service. Total. 4. 6. 6. 7. 8. No. Annuity to Credit. No. Annuity to Credit. No. Annuity'to Credit. No. Annuity to Credit. „ Annuity to ^°- ! Cred.t. i 32 57 30 11 11 2 2 3 £ 46-974 102-141 50-317 18-161 11-651 1-683 2-055 2-216 15 29 41 19 9 2 2 4 £ 9-590 37-635 44-826 19-611 8-099 1-493 -991 1-582 3 13 11 6 9 1 1529 11-209 7-751 2-568 3-902 1-963 •275 4 6 3 £ -970 •630 •450 1.679 3,714 1,447 952 789 560 345 132 84 32 £ 746-258 7,538-656 4,509-882 2,806-821 2,097-026 1,268-077 670-554 211-590 106-987 25-972 148 235-198 121 123-827 48 29-197 13 2-050 9,734 19,981-823 349 988-898 280 573-684 212 224-545 63 24-097 35,163 174,700-959 1,045 1,644-412 856 868 • 156 537 292-672 148 30-982 61,707 145,023-967 1,394 2,633-310 1,136 1,441-840 749 517-217 211 55^079 96,870 319,724-926 11. 18 BLEMEN'TARY SOHOOL TfiAOHEES* DEFERRED ANiTUIfX fUNfi. TABLE V. England and Scotland combined. Male Teachers. Comparison of the number of deaths which were recorded among the members of the Fund, with the number which would have taken place had the mortality followed- - A.— The British Government Annuity Table on which the rates of contribution to the Fund are based. B. -The British Offices Annuity Table, published in 1903 by the Institute of Actuaries and the Faculty of Actuaries, and derived from the experience of lives on whom annuities were granted in the United Kingdom by 42 insurance companies. C. -The Mortality Table, derived from the experience of total abstainers, published in the " Journal of the Institute of Actuaries," January 1904. D.— Mortality Table, derived from the experience of the clergy of the Church of England, pubHshed by the Clergy Mutual Life Assurance Society in 1891. 1''.. -New^table for teachers, prepared from the experience of the Fund its'elf, modified in accordance with the Abstainers' table, the (lergy table, and the British Offices' table. AgL G ['oiips. Number iit Kisk. Kecoi'decl Deaths. Govei'iimeiit. Expected Deaths by £. Teachers' New Experience Table. 20 to 29 47,703 112 ,-)22 312 204 167 218 30 „ 39 - 58,813 1.>1 833 501 252 251 252 40 „ 49 - 47,«51 308 878 561 296 287 306 M „ .39 19,323 268 469 383 258 271 275 60 „ 69 - 7,447 229 2(jl 268 220 205 216 Total 181,137 1 1,071 2,963 2,025 1,230 1,181 1,267 ELEMENTARY SCHOOL TEACHERS' DEFERRED ANNUITY FUND. 19 TABLE VI. England and Scotland combined. Female Teachers. Comparison of the number of deaths -which were recorded among the members of the Fund with the number which would have taken jilace had the mortality followed — A.— The British Government Annuity Table on which the rates of contribution to the Fund are based. B.— The British Offices Annuity Table, pubhshed in, 1903 by the Institute of Actuaries and the Faculty of Actuaries, and derived from, the experience of lives on whom annuities were granted in the United Kingdom by 42 insurance companies. C. — New table for teachers, prepared by modifying the actual iexperience in the same way that the male experience has been modified. Age » CrTOUpS. 20 to 29 - 30 „ 39 40 „ 49 50 „ 59 60 „ 69 - Number at Risk. 112,654 70,285 50,947 19,276 5,007 Recorded Deaths. 164 173 218 209 108 Expected Deaths by A. Government. 897 680 597 323 133 B. British Offices. 706 605 622 338 126 C Teachers' New Eziperience Table. 350 229 232 206 106 Total 258,169 872 2,630 2,397 1,123 TABLE VII. New Mortality Tables for Teachers. Rates of Mortality per cent, derived as explained in the Actuary's Report of Wth August 1907. * Rat E of Mortality per cent. Rat 3 of Mortality per cent. Age. Rate of Mortality per cent. Age. Men. Women. Men. W ''omen. Men. Women. 20 •263 •270 40 475 343 60 2-209 1-678 21 343 •289 41 503 357 61 2-393 1-809 22 402 ■300 42 538 377 62 2 594 1-952 23 442 •308 43 577 403 63 2^815 2^109 24 467 •312 44 623 436 64 3^060 2-284 25 480 •315 45 674 476 65 3-330 2-480 26 484 ■316 46 730 522 66 3-629 2-699 27 482 •317 47 791 574 67 3-961 2-945 28 474 •318 48 858 630 68 4^330 3-224 29 463 •319 49 931 692 69 4^739 3-540 30 451 •320 50 1 009 758 70 5^193 3-898 31 438 ■321 51 1 093 826 71 5-698 4-303 32 428 •322 52 1 184 903 72 6-258 4-763 33 419 ■323 53 1 280 982 73 6-880 5-303 34 413 •324 54 1 384 1 065 74 7-569 5-905 35 411 -325 55 1 496 1 152 75 8 333 6-577 36 414 i -326 56 1 617 1 245 76 9.185 7-314 37 421 i -327 57 1 747 1 342 77 10^053 8-109 38 434 •330 58 1 888 1 446 78 10-963 8-955 39 451 •335 59 2 042 1 558 79 11-914 9-847 N.B. — From ace 80 onwards the rates of mortality are those of the British Offices Ultimate Annuity Tables for males and females respectively. n. D 20 EtEMteNTARY SCHOOL TEACHEES' DEFERRED ANNUITY FOND. TABLE VIII. Summary of Valuation No. 1, made as on 31st March 1906, by the New Mortality Tables for Teachers. Interest, 2\ per cent. Description of Contracts. No. of Teachers. Annuities to Credit. Estimated Liability. No. of Teachers. Annuities to Credit. Estimated Liability. English Tbachbbs.— Men. Eng 50,871 648 454 lish Teachees. — Women. Deferred annuities, English service only. Defen-ed annuities, service in both countries. Current annuities, English service only. Current annuities, service in 29,547 202 632 1 £ s. i/. 149,751 y 392 18 10 806 6 9 1 12 10 £ s. a. 562,138 16 1,222 10 7,493 8 15 16 £ s. ci. 123,791 10 11 888 2 2 362 9 10 £ g. d. 520,316 14 3,180 10 3,777 10 Total, England 30,382 150,961 19 2 570,870 10 51,973 125,042 2 11 527,274 14 Scottish Teachebs.— Men. Scottish Teachees.— Women. Deferred annuities, Scottish service only. Deferred annuities, service in both countries. Current annuities, Scottish service only. Current annuities, service in 4,472 202 106 1 22,985 9 6 619 11 9 143 14 5 4 5 88,379 14 1,812 16 1,344 8 2 2 9,059 648 27 19,274 9 8 687 7 19 19 10 77,634 18 2,539 10 209 14 Total, Scotland 4,781 23,749 1 91,539 9,734 19,981 16 6 80,384 2 TABLE IX. Summary of Valuation No. 2, made as on 3lst March 1906, by the Tables and at the Rate of Interest at present in use by the Fund. Description of Contracts. Deferred annuities, English service only. Deferred annuities, service in both countries. Current annuities, English service only. Current annuities, service in both countries. Total, England Deferred annuities, Scottish service only. Deferred annuities, service in both countries. Current annuities, Scottish service only. Current annuities, service in both countries. Total, Scotland No. of Teachers. Annuities to Credit. Estimated Liability. English Tbacheks.- Jlen. 29,547 202 632 1 30,382 149,751 s. d. 9 392 18 10 806 6 9 1 12 10 150,951 19 2 € s. d. 496,859 6 1,043 4 7,470 10 15 14 505,388 14 Scottish Teachers. — Men. 4,472 202 106 1 4,781 22,985 9 6 619 11 1) 143 14 5 4 5 23,749 1 78,540 12 1,530 14 1,340 14 2 2 81,414 2 No. of Teacher,"!. Annuities to Credit. Estimated Liability. English Teachers. — Women. 1 £ .?. d. 50,871 ; 123,791 10 11 648 454 888 2 2 362 9 10 51,973 125,042 2 11 £ «. d. 494,958 2,993 3,784 6 501,735 6 Scottish Teachers.— Women. 9,059 648 97 9,734 19,274 9 8 r,S7 7 19 19 10 19,981 K) 6 73,202 4 2,889 2 210 4 75,801 1(1 ELEMENTARY SCHOOL TEA.OHEES DEFERRED ANNUITY FUND. 21 TABLE X. Summary of Valuation No. 3, made as on 31st March 1906, by the Government Annuity Tables, 1883. Interest, 2^- per cent. Description o£ Contracts. No. of Teachers. Annuities to Credit. Estimated Liability. No. of Teachers. Annuities to Credit. Estimated Liability. 1 j English Tbaohebs. — Men. English Tbaohebs — Women. Deferred annuities, English service only. Deferred annuities, service in both cguntries. Cun-ent annuities,' English service only. Current annuities, service in both countries. Total, England 29,5i7 202 632 1 £ x. d. 149,751 9 3!»2 18 10 SilG li 9 1 12 10 .€ s. d. 414,503 10 (J 843 12 6,999 10 14 14 50,871 648 C s. d. 123,791 10 11 888 2 2 3(12 9 10 £. .1. d. 406,282 4 2,380 14 3,527 2 30,382 150,951 19 2 422,361 6 51,973 125,042 2 11 412,190 Scottish Tbachbbs.— Men. Scottish Teachees. — Women. Deferred annuities, Scottish service only. Deferred annuities, service in both countries. Current annuities, Scottish service only. Current annuities, service in both countries. Total, Scotland 4,472 202 106 1 22,985 9 6 i;i9 11 9 143 14 5 4 5 65,775 12 1,225 4 1,255 12 2 9,059 648 27 19,274 9 8 687 7 19 19 10 59,553 18 1,913 4 196 4,781 23,749 1 68,258 8 9,734 19,981 16 6 61,663 2 TABLE XL Elementary School Teachers. Gomparison of the amounts of Deferred Annuities secured by a single payment by the tables at present in use by tbe Fund, with the amounts by the new tables for teachers, and with the amounts at Post Office rates : — Men. Annuity at Age 65. Secured by a Single Payment of SI. — Women. Exact Annuity at Age 65. Secured by a Single Payment of 21. Exact Age. Age. Present Table. New Table for Teachers. Post Office. Present Table. New Table for Teachers. Post Office. £ s. d. £ s. d. £ s. (/. £ s. d. £ s. d. £ «. d. 21 1 13 3 1 7 3 2 2 15 7 14 7 19 10 21 25 1 9 6 1 4 4 1 16 7 13 11 13 1 , 17 5 25 30 1 5 2 1 11 1 10 6 12 1 11. 7 ; 14 9 30 35 1 1 4 18 2 1 5 3 10 5 9 10 : 12 5 35 40 17 10 15 8 1 8 090 087,0 10 6 40 45 14 10 13 6 16 9 078 075089 45- 50 12 1 11 6 13 5 066 065073 • 50 55 9 9 9 6 10 7 5 6 5 6 5 11 55 60 7 8 7 9 — 4 6 4 6 60 d M rt a t>d w H •=! W a t=l CO >- § w S CD C5 t^ o w m W rt K H K w SI H w O tel S ^ O i§ Hi H 3 1924 032 187 472 olin.anx